What a Republican president could mean for your taxes

BillBischoff

Even though the next presidential election is still more than a year away, the political season is in full swing. Among the significant distinctions between the candidates are their tax plans. In this column, I’ll cover what the (arguably) top four GOP candidates have said on the subject.

Next week, I’ll do the same for the top three Democrats, including the still-undecided Joe Biden.

Donald Trump’s tax plan

For individuals, Trump proposes fewer tax brackets and lower rates: 0%, 10%, 20% and 25% (versus current rates of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%). The top 25% rate would kick in at income of $300,001 for married joint-filing couples and $150,001 for singles. Married couples earning $50,000 or less and singles earning $25,000 or less would pay no federal income tax.

Trump’s plan would also cut the corporate tax rate from the current 35% to 15%. Good idea! I’ve advocated the same thing. The 15% rate would also apply to business income from sole proprietorships and business income passed through to individuals from S corporations, LLCs, and partnerships. Business tax-deferral schemes would be eliminated. Ditto for business interest deductions.

Some existing individual write-offs would be sacrificed, but deductions for home mortgage interest and charitable donations would be retained.

According to an analysis by the Tax Foundation, a nonprofit, non-partisan tax research group in Washington, D.C., Trump’s plan would reduce federal tax revenues by $11.98 trillion over 10 years. But it would also improve incentives to work and invest, which could increase gross domestic product (GDP) by 11% over the long term. The increased GDP could translate into 6.5% higher wages and 5.3 million new jobs, according to the analysis. After accounting for increased tax revenues generated by higher wages and more jobs, Trump’s plan would reduce tax revenues by $10.14 trillion over 10 years.

Carly Fiorina’s tax plan

Unlike Trump, Carly Fiorina has not yet put forward a detailed tax plan. However, she has issued some important clues. She says the current tax system is in desperate need of reform and simplification. To accommodate a smaller and simpler tax system, Fiorina advocates “zero-based budgeting,” which would mean that all government funding discussions would start from a base budget of zero and build from there (as opposed to the current practice of starting with the previous year’s spending and going up). [Source: PBS News Hour “2016 Candidate Stands” May 4, 2015.]

Fiorina also staked out some tax positions in her 2010 run for a California Senate seat. To paraphrase, she said the federal tax burden is too high and must be lowered to get the economy growing again. That translates into making actual cuts in federal spending. Source: Hogue News 1380 KTKZ coverage of 2010 CA Senate debate, March 7, 2010. Fiorina signed the Americans for Tax Reform Taxpayer Protection Pledge promising that she would not vote for any new or increased taxes. [Source: 2010 Senate campaign website (Dec. 25, 2009).]

Ben Carson’s tax plan

Like Fiorina, Ben Carson has not put forward a detailed tax plan. However, his website says (to paraphrase) the Internal Revenue Code is too long, too complex, too burdensome, and too riddled with tax shelters and loopholes that benefit only a few at the expense of the many. He advocates wholesale tax reform which he says won’t be accomplished by career politicians. Carson says you should be able to complete your tax form in less than 15 minutes, which would eliminate the need for the IRS.

In interviews, Carson has advocated a flat tax which he calls a proportional tax system. “You make $10 billion, you pay a billion. You make $10, you pay $1. And everybody gets treated the same way. And you get rid of the deductions, you get rid of all the loopholes.” [Source: Fox News/Facebook Top Ten First Tier debate transcript, August 6, 2015.]

• Eliminate or reform deductions, especially those who disproportionately benefit the privileged few at everyone else’s expense.

• Eliminate the marriage penalty.

• Level the playing field for working parents by augmenting the current child tax credit of $1,000 with an additional $2,500 credit which could be used to offset both the federal income tax and federal payroll taxes.

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